Economics: Indicators released in May point to an economic deceleration
Economic indicators released over the course of May confirm a gradual but sustained weakening of economic activity, which adds to other internal and external economic challenges that will be exacerbated during 2025. The signs of weakening not only extend throughout the supply components, but also the demand side, for which the available indicators so far in 2024 depict an unfavorable outlook as both total private consumption and retail sales show downward trends.
Moreover, inflation continues to rebound, a development that prompted policy makers at Banxico to rethink their early March quarter-point rate hike and unanimously approve a pause even as there has been considerable evidence of a board deeply divided over how to proceed, sowing considerable confusion. And just this past week, the April report on public finances confirmed once again that while the external public debt balance has remained at practically the same level as a year earlier, local currency debt continues to expand by more than a real 10% yoy as signs of problems to come continue to mount.
On the investment side, it was reported that almost 97% of FDI corresponded to reinvestment of profits during the first quarter, the latest sign that Mexico is still missing the boat when it comes to nearshoring.
In response to the data, institutions and analysts alike have been lowering their 2024-2025 forecasts from the levels they were projecting at the end of last year.
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